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Daimler exit helps Fiat, Chrysler

2009-04-29 07:06
Detroit - Daimler AG's deal to exit its 19.9% stake in Chrysler LLC facilitates the US automaker's proposed partnership with Fiat SpA, Chrysler chief executive Bob Nardelli said on Tuesday.

The move will help Chrysler meet the requirements laid out by the US government by the month-end deadline, Nardelli said in a memo to staff that was obtained by Reuters.

"We continue to remain focused on completing these and all other transactions needed to qualify for ongoing financial support from both the US and Canadian governments," he said in the memo.

Daimler on Monday said it would redeem its remaining 19.9% stake in Chrysler and would forgive loans extended to Chrysler that it has already written off in its 2008 financial statements.

The German automaker loaned Chrysler $1.5 billion in 2008. It is a second-lien secured loan, junior to a nearly $6.9 billion of loans now under negotiation between the US Treasury and other Chrysler creditors.

Daimler also said it agreed to pay $200 million to Chrysler's pension plans on the date of the execution of the deal and in each of the next two years.

Private equity firm Cerberus and Chrysler have been in negotiations with Daimler to buy the German automaker's remaining Chrysler stake since late 2007. Daimler sold 80.1% of Chrysler to Cerberus earlier that year.

Chrysler has only a few days left until April 30 to reach agreements for an alliance with Italy's Fiat and a reduction in secured debt as mandated by president Barack Obama's task force.

Chrysler has already reached deals with the United Auto Workers union to slash the company's obligations to a retiree health care fund.


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